Anti-Money Laundering Directive # 3, 4, 5!

Even though the 4th Anti-Money Laundering Directive has been just implemented into national laws across the EU, the European Parliament has already adopted the 5th Directive. Member States were given a period of eighteen months for the full implementation of the newly adopted regulations.

The new AML-Directive introduces several key innovations. The most important one is the extended public accessibility of beneficial ownership registers. They shall now be open to the public without any need to demonstrate a legitimate interest. It can be expected that the beneficial ownership register will be widely accessible similar to the Czech Commercial Register which allows anyone to see any content online. Only the access to registers of trusts and similar legal arrangements will further require a legitimate interest, at least for the time being.

However, the open accessibility of the beneficial ownership register may not always guarantee that the ultimate beneficial owner will be truly determined. The legal definition of beneficial ownership allows to determine the real owner based on several statutory indicators. In business corporations in which nobody possesses voting rights, a profit share or an ownership interest exceeding 25 %, the beneficial owner is presumed to be a member of the executive board of the respective corporation. Since the register shows only the name of a beneficial owner without indicating a reason or presumption for this, the registered name can be misleading. In other words, one cannot be sure if a particular person listed in the register is indeed the ultimate beneficial owner of a corporation or merely member of an executive board.

The 5th Anti-Money Laundering Directive is in particular important to those, who provide electronic wallet and virtual currency exchange services. Similar to financial and credit institutions, these platforms are now considered ‘obliged entities’. Thus, they shall now play an active role in money laundering detection by verifying the identity of clients and performing customer due diligence to ensure they ‘know their customers’. The directive further endows the national Financial Intelligence Units with more powers and competences. This shall support and simplify the exchange of information among the Member States.

There is no doubt that the EU will continue to strengthen its anti-money laundering policy and its efforts to prevent the financing of terrorism. The implementation of the 5th AML-Directive seems to be a good opportunity for the Czech lawmakers to eliminate existing inconsistencies regarding the beneficial ownership register. However, only the practical application will show us to what extent they succeeded.